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The  Government  and  the 

Railways 


ADDRESS  BY 

Hon.  JAMES  M.  COX 

At   the   Annual   Dinner   of   the 
Railway  Business  Association 


December  11,  1913 


REQUESTS      FOR     COPIES 

of  this  pamphlet  will  be  welcome  from  all 
those  desiring  to  place  it  in  the  hands  of 
their  representatives  or  friende.  Copies  fur- 
nished or  sent  direct  to  lists  upon  application 
to  Frank  W.  Noxon,  Sec'y.  Railway  Business 
Association,  30  Church  Street,  New  York. 


Form  B137 


C^^S»3^ 


Government  and  the  Railways 


V 


AN  ADDRESS  BY 

Hon.  JAMES   M.  COX 
Governor  of  Ohio 


Delivered  at  the  Fifth  Annual  Dinner  of  the  Railway  Business 
Association,  the  national  association  of  manufacturers  of 
railway  materials,  equipment  and  supplies,  at  the  Waldorf- 
Astoria  Hotel,  New  York,  December  11,  1913 


Business  and  government  are  be- 
ginning to  understand  each  other  bet- 
ter— a  development  in  attitude  born  of 
expediency  on  the  one  hand,  and  an 
awakened  consciousness  of  responsi- 
bility on  the  other.  Business  in  its 
present  form  is  a  distinct  social  evo- 
lution, based  on  the  elements  of 
human  dependence.  In  fact,  it  not 
only  antedates  organized  society,  but 
it  was  the  one  thing  most  condu- 
cive to  the  association  of  man  without 
\  which  he  would  still  be  encased  in  the 
'  Vshell  of  primitive  darkness. 

As    government    sprung    logically 
from  the  social  organization,  then  a 
,       very   simple   analysis   establishes   the 
.       important  part  that  the  mere  exchange 
;       of  products  and  utilities  has  played  in 
I       the   whole   scheme   of   things.     This 
very    obvious    co-relation    makes    it 
m.     difficult  to  account  for  the  prejudice 
which  government  so  long  held   for 
business.    And  yet  we  must  not  delude 
**•  ourselves   into  the  thought   that  the 
human  element  was   lacking  in  this 
•     estrangement.     The  tendency  of  gov- 
ernment is  but  the  impulse  of  humani- 
ty.   Laws  are  but  the  reflex  of  a  con- 


trolling public  desire — the  act  of  gov- 
ernment being  as  closely  joined  to  the 
social  organization  as  the  movement  of 
the  arms  to  the  mind  which  directs 
them. 

So  that  we  are  brought  confessedly 
to  the  proposition  that  the  mass  has 
been  drawn  into  agreed  opposition  to 
the  class.  There  is  a  high  average  of 
fairness  in  public  opinion,  the  admis- 
sion of  which  brings  the  thought  that 
unfair  advantages  have  obtained 
somewhere.  As  our  government  is  de- 
signed to  maintain  the  largest  meas- 
ure of  equality  and  opportunity 
possible,  then  it  must  adjust  itself  to 
the  useful  function  of  correction. 

PARENT  GUILTY  TOO 

So-called  big  business  was  char- 
tered by  government,  and  if  the  child 
has  been  guilty  of  abuses,  the  parent 
is  not  blameless  for  permitting  them 
to  go  on  until  they  assume  the  form 
of  a  distinct  menace  to  the  industrial 
life  of  the  nation.  (Applause.) 
Everyone  but  the  cynic  grows  into  an 
acceptance    of    the    philosophy    that 


things  balance  up  pretty  evenly  in  the 
game  of  life,  and  it  would  seem  that 
the  agencies  which  by  one  form  or 
another  postponed  the  day  of  govern- 
mental regulation  find  the  conse- 
quences falling  upon  them  with  some 
severity.  (Applause.)  On  the  other 
hand,  the  nation,  now  aroused  from 
the  lethargic  spirit  of  letting  well 
enough  alone,  finds  the  results  of 
its  long  neglect  spread  into  every 
community. 

A  NATIONAL  RESPONSIBILITY 

The  country  is  now  facing  a  re- 
sponsibility which  must  be  met  with 
candor  and  courage.  Something  must 
be  done  with  the  railroad  quc-tion. 
Let  us  discuss  it  frankly  in  its  im- 
portant phases. 

First — The  part  which  transporta- 
tion plays  in  our  afifairs,  and  in  the 
development  of  the  country. 

Second — The  real  condition  of  the 
railroads,  physical  and  financial. 

Third — The  cause  of  the  present 
confusion. 

Fourth — The  remedy. 

IMPORTANCE  OF  TRANSPORTATION 

It  is  surprising  upon  analysis  of 
industrial  activities  to  find  the  poten- 
tial part  that  the  railroads  play.  Ours 
is  a  great  country  of  vast  domain. 
Our  lands  possess  the  diversified  fer- 
tility which  yields  the  extremes  of 
corn  and  cotton.  Our  mines  give  up 
the  richest  treasures  in  all  the  world. 
The  genius  of  man  lays  hand  on  the 
waterpower  of  our  rivers.  We  enjoy 
the  varying  climates  common  to  every 
region  from  St.  Petersburg  on  the 
north  to  Palestine  on  the  south.  We 
attract  the  strong,  red  blooded  people 
of  all  nations,  and  as  they  pass 
through  the  melting  pot  of  the  Ameri- 
can institutions,  there  comes  from  it 
that  wonderful  composite  figure,  the 
American  citizen.  (Great  applause.) 
And    yet,    with    all    these    God-given 


advantages,  what  would  it  avail  the 
great  Northwest  to  grow  bread  for 
millions  if  its  products  could  not  be 
transported  all  over  the  world,  in-^ 
ducing  in  steady  flow  the  yellow 
stream  of  gold?  The  south,  facing 
the  future  with  every  promise  of  « 
restored  commercial  strength,  would 
fall  into  stagnation  if  the  means  were 
not  provided  to  convey  cotton  from 
the  plantation  to  the  spindles  and  • 
looms  of  the  globe.     (Applause.) 

The  great  middle  west,  a  giant  in 
the  part  it  plays  in  the  afifairs  of  man, 
would  lapse  into  decline  if  transpor- 
tation lines  did  not  tap  the  fields  of 
this  vast  universe.  We  are  a  great 
people  because  we  produce  practically 
everything  necessary  to  civilization. 
We  are  essentially  a  nation  of  traders, 
because  the  north,  south,  east  and 
west  must  sell  to  and  buy  from  each 
other. 

We  are  a  concrete  mass  in  com- 
merce because  the  genius  of  man  has 
solved  the  problem  of  distance  and 
isolation.  Lay  down  the  map  of  the 
republic  and  trace  the  network  of 
railroad  lines.  In  combined  mileage 
they  span  the  distance  from  the  earth 
to  the  moon.  They  pierce  every 
state.  In  19 12  they  transported 
1,019,658,605  passengers.  Over  every 
mile  of  track  were  carried  more  than 
a  million  tons  of  freight  and  138,169 
passengers. 


SPIRIT   OF  RAILWAY   ORGANIZA- 
TIONS 

The  vast  organizations  are  held 
together  by  a  spirit  as  impressive  as 
that  dominating  an  army.  No  order 
of  loyalty  exceeds  that  of  the  vast 
majority  of  officers,  while  the  privates 
unflinchingly  face  dangers  every  day 
that  would  try  the  metal  of  the  sea- 
soned soldier.     (Applause.) 

The  great  trunk  lines  and  feeders     ' 
resemble  the  circulation  system  of  the 
human  body. 


And  if  you  lay  your  finger  on  the 
pulse  of  the  railroad  organism  you 
have  certain  and  unmistakable  symp- 
toms of  the  country's  prosperity  or 
adversity.  (Applause.)  One  out  of 
every  twelve  male  adults  in  this  coun- 
try is  employed  by  the  railroads. 
Their  contribution  to  labor  and  manu- 
»  facturing  makes  up  one-twelfth  of  the 
commerce  of  the  land.  No  city  of  any 
size  has  grown  without  a  railroad. 

OHIO'S  GREAT  FLOODS 

When  the  great  commonwealth  of 
Ohio  was  stricken  last  spring  with  the 
great  flood  catastrophe  we  lay  stunned 
and  helpless  until  railroad  communi- 
cation was  established.  As  soon  as 
the  severed  cords  were  put  together 
the  whole  aspect  changed.  Communi- 
ties were  fed  and  the  vital  life  of  the 
state  restored. 

Certainly  none  will  deny  how  im- 
portant the  railroads  are  and  how 
essential  it  is  to  conserve  this  utility, 
and  by  this  is  meant,  protection  from 
unwise  operation,  and  a  guarantee  of 
measurable  safety  to  the  individual 
and  institutions  that  have  hazarded 
their  capital.  The  health  of  the  rail- 
roads is  very  far  reaching,  when  we 
consider  that  aside  from  the  ordinary 
investor,  life  insurance  companies, 
holding  in  their  hands  the  hopes  and 
expectations  of  almost  thirty  million 
policyholders,  have  invested  one  and  a 
quarter  billion  dollars  in  railroad 
securities. 


respects.  The  development  of  the 
country  makes  a  call  on  the  railroads 
for  extensions  and  equipment,  which 
finds  an  enforced  feeble  response. 
They  could  advantageously  to  the 
public  use  hundreds  of  millions  of 
dollars  right  now.     (Applause.) 

Three  years  ago  James  J.  Hill,  with 
a  vision  that  was  almost  prophetic, 
stated  that  the  railroads  should  for 
five  years  expend  a  billion  dollars 
annually  for  construction,  if  they  were 
to  handle  the  business  of  the  country 
efficiently.  (Applause.)  He  pre- 
dicted congested  terminals,  and  vastly 
inadequate  facilities,  and  events  show 
the  wisdom  of  his  observation. 

RAILWAY  CREDIT  IMPAIRED 

With  the  public  and  the  railroads  in 
agreement  on  the  proposition  that  the 
march  of  progress  has  passed  the 
transportation  business,  the  fact  re- 
mains, that  the  railroads  cannot  bor- 
row the  money  to  provide  for  the 
situation.  Short  time  notes  have  been 
given  to  meet  current  and  emergency 
expenses,  and  if  the  banks  of  the 
country  were  to  demand  payment  we 
would  be  in  the  throes  of  a  well 
organized  panic.  Investors  have  been 
driven  to  other  fields,  notwithstanding 
no  business  is  based  on  a  more  stable 
utility  than  that  of  the  railroads.  The 
amount  of  securities  listed  on  the  New 
York  Stock  Exchange  by  steam  rail- 
roads in  1912  was  the  smallest  in  ten 
years. 


CONDITION  OF  THE  RAILWAYS 

Now,  what  is  the  condition  of  the 
railroads?  We  have  enjoyed  unpre- 
cedented prosperity.  Commerce  has 
its  ups  and  downs  but  the  tonnage  of 
the  railroads  continues  stupendous. 
Terminals  in  every  city  are  insufficient. 
There  is  congestion  at  these  points 
which  interferes  with  the  normal 
tide  of  travel.  Service  is  beginning  to 
show  the  lack  of  old  time  regularity. 
Rolling  stock  is  inadequate  in  some 


RAILWAY  REGULATION 

While  there  can  be  no  difference  in 
opinion  with  reference  to  the  utility  of 
the  railroads,  their  present  physical 
and  financial  condition,  and  the  neces- 
sity of  their  conservation,  there  may 
be  a  vast  divergence  in  views  with 
reference  to  what  has  brought  about 
the  present  situation  and  the  correct 
remedies  which  must  come  from  both 
the  common  sense  and  fairness  of  the 
American  people.     Where  symptoms 


are  so  well  marked  it  seems  to  me 
that  the  diagnosis  ought  to  be  meas- 
urably easy.  You  hear  in  many 
quarters  the  statement  that  adverse 
legislation  and  the  policy  of  regulation 
by  the  government — state  and  federal 
— are  the  largest  contributing  factors. 
I  do  not  subscribe  to  this  view.  In 
fact,  sane  regulation  will  become  the 
ultimate  salvation  of  the  business. 
(Applause.) 

REGULATION  NOT  SOON  ENOUGH 

One  cannot  resist  the  thought,  when 
he  surveys  the  abuses  of  overcapitali- 
zation, financial  adventure  and  per- 
sonal exploitation,  that  the  mistake  in 
regulation  has  been  that  it  didn't 
come  soon  enough.  Prior  to  regula- 
tion by  government  20%  of  the  rail- 
roads of  the  country  were  in  the  hands 
of  receivers.  This  was  the  situation 
in  1894.  It  cannot  but  be  regarded  as 
significant  that  the  New  York  Central, 
Baltimore  and  Ohio  and  Pennsylvania 
Railroads,  with  a  combined  capital 
stock  of  $934,000,000,  have  issued 
since  1900,  during  the  period  of 
increased  regulation,  stock  to  the 
amount  of  $548,000,000,  upon  which 
they  realized  more  than  $600,000,000 
in  cash,  the  securities  having  sold  at 
a  handsome  premium. 

COWARDICE  AND  CORRUPTION 

No  one  will  contend  that  the  laws 
in  some  of  the  states  have  not  been 
unduly  burdensome.  The  truth  is  that 
in  the  political  affairs  of  a  nation  the 
two  harmful  elements  are  cowardice 
and  corruption,  and  as  debasing  as 
corrupt  influences  have  been,  the  ulti- 
mate harm  from  cowardice  in  public 
station  has  been  infinitely  greater. 
(Great  applause.)  Personal  political 
expediency  is  too  apt  to  rise  transcen- 
dent to  the  public  welfare.  There  has 
been  a  regrettable  absence  of  that 
order  of  courage  to  withstand  some 
legislation  born  of  prejudice  against 
the  railroads,  and  I  believe  you  gentle- 


men will  agree  that  this  prejudice  de- 
veloped in  considerable  degree  because 
of  the  unwise  and,  in  some  instances, 
reprehensible  administrative  policies 
of  some  companies. 

NEW  MORAL  STANDARDS 

No  one  will  seek  to  condone  the 
practice  of  milking  railroads  in  order 
that  the  executive  officers  and  direc- 
tors might  be  illegally  and  immorally 
given  vast  fortunes  through  the  artful 
and  insidious  method  of  contracting 
with  themselves  for  construction 
work.  (Applause.)  No  man  in  con- 
science will  avow  the  propriety  of  a 
wildcat  policy  in  the  issuance  of 
securities.  No  community  in  America 
will  produce  the  man  who  will  at- 
tempt to  justify  the  practices  which 
have  shaken  the  confidence  of  the 
conservative  thought  of  New  Eng- 
land. These  abuses  of  power,  like 
every  other  disaster,  in  social  or  eco- 
nomic life,  have  their  compensations. 
There  is  always  a  hidden  blessing 
which  plays  its  part  in  working  out 
an  ultimate  evolution  along  the  lines 
of  morality  and  sound  business  policy. 
There  is  no  saying  more  truthful  than 
that  the  hazard  always  makes  the 
man ;  and  it  is  fortunate  that  over  the 
wreckage  of  these  misguided  projects 
there  come  men  with  a  vision,  a 
humanity  and  a  courage  which  give 
hope  to  this  whole  country,  which 
cannot  but  look  upon  the  situation 
with  grave  concern.     (Applause.) 

ABOLITION  OF  REBATES 

The  method  of  regulation  by  gov- 
ernment which  prevents  preferential 
rates  and  rebates  is  not  only  helpful  to 
the  railroads  themselves,  but  it  is  a 
dignified  participation  of  government. 
These  quasi-public  corporations  spring 
into  life  by  the  consent  of  society 
through  the  agencies  of  government. 
That  is  the  first  and  essential  element 
of  vitality  to  the  project ;  and  the  insti- 
tution responsible  for  the  birth  of  the 


6 


corporation  not  only  has  a  constitu- 
tional right  to  retain  a  reserve  power 
of  control,  but  the  moral  obligation  to 
do  so  is  just  as  binding.  (Applause.) 
The  misconduct  of  the  child  is  a  re- 
proach upon  the  parent  if  he  has  been 
remiss  in  his  duty.  It  is  unfortunate 
that  the  railroads  in  their  failure  to 
recognize  the  ultimate  advantage  from 
regulation,  drifted  for  a  time  into  a 
nation-wide  policy  of  resistance,  and 
this  resulted  in  some  instances  in  a 
too  large  corporate  participation  in 
politics. 

RESTORE  THE  PATIENT  FIRST 

Now,  what  is  the  remedy? 

First  of  all,  we  might  just  as  well 
recognize  at  the  outset  that  a  puri- 
tanical severity  with  stockholders  who 
honestly  acquired  their  securities  is 
not  going  to  do  any  good.  The  thing 
to  do  is  to  restore  the  patient  and  then 
prescribe  and  enforce  a  diet  and  be- 
havior which  will  prevent  recurrent 
illness.  The  man  who  stands  for  pro- 
gressiveness  in  government  bases  his 
plea  upon  the  theory  that  all  things 
are  changing ;  that  man  and  his  activi- 
ties must  fall  into  inevitable  subjection 
to  the  laws  of  evolution;  and  we 
remind  the  ultra-conservative  that 
things  not  only  change  in  business,  in 
professions,  in  the  sciences,  in  all  the 
agencies  of  life  itself,  but  that  each 
age  brings  its  changes  in  accepted 
fundamentals  of  justice. 

NEW  ETHICAL  YARD  STICK 

Our  fathers  subscribed  to  many 
things  in  full  conscience  that  are 
shocking  to  present  day  ideals.  My 
reference  is  obviously  to  the  offense 
for  witchcraft,  imprisonment  for  debt, 
and  the  property  qualification  in  suf- 
frage. We  must  therefore  be  consis- 
tent and  recognize  this  as  fundament- 
ally just — that  the  transgression  of 
yesterday  cannot  and  must  not  be 
measured  with  the  ethical  yardstick 
of  today.  (Applause.)  It  is  more 
creditable,   I   feel  sure,  to  adhere  to 


this  doctrine  than  to  frame  a  policy 
of  confiscating  the  holdings  cf  present 
owners  who  are  in  no  way  to  blame 
for  the  abuse  of  those  who  sold  them. 

NEW  ENGLAND  SITUATION 

Some  may  contend  that  the  govern- 
ment is  not  the  guardian  of  the  people 
in  their  traffic  regulations,  one  with 
the  other,  but  that  does  not  reach  the 
question  of  the  government's  neglect 
for  years  in  permitting  its  corporate 
creature  to  run  amuck.  (Applause.) 
We  have  in  illustration  of  this 
thought,  the  developments  of  today  in 
the  affairs  of  the  New  Haven  road. 
(Applause.)  The  whole  country 
stands  appalled.  A  great  property 
builded  on  the  resource,  thrift  and 
pioneer  morals  of  New  England,  has 
been  drained  of  its  very  blood  and 
bone,  through  methods  that  inspired 
the  divine  command  "Thou  shalt  not 
steal."  (Applause.)  Of  the  22,000 
stockholders,  half  are  women,  many 
are  estates  and  trustees,  a  circum- 
stance which  speaks  the  confidence  of 
those  now  dead.  What  excuse  has 
government  to  offer  those,  who  lived 
secure  in  the  thought  that  it  protected 
the  defenceless  ?  What  word  have  the 
States,  responsible  for  this  outrage,  to 
utter  in  explanation?  It  would  have 
been  impossible  of  accomplishment  in 
any  progressive  State.  I  feel  sure  the 
federal  government  in  its  present 
hands  will  not  remain  dumb  to  the 
constitutional  command  of  absolute 
control  over  interstate  commerce. 
(Applause.) 

SOCIETY  MUST  PAY 

As  the  responsibility  was  divided  in 
the  first  instance,  there  should  now 
be  common  acquiescence,  as  between 
the  government  and  the  railroads,  in 
the  suggestion  to  seal  the  past  and  pro- 
ceed in  making  of  a  better  order  of 
things  on  an  entirely  new  base. 

If  we  concede  that  the  agencies  of 
transportation    must    be    healthy    in 


order  that  the  country  can  grow  and 
develop,  then,  regulation  must  pro- 
ceed on  the  theory  that  what  society 
imposes  on  the  railroads,  society  itself 
must  pay  for.  (Applause.)  If  in- 
creased taxes,  larger  compensation  for 
labor,  the  application  of  safety  de- 
vices, the  maintenance  of  expensive 
schedules  and  other  things,  are  insisted 
upon  by  society,  through  government, 
then  the  railroads,  like  any  other  insti- 
tution, must  be  given  the  right  and  the 
facility  to  distribute  the  burden.  The 
business  man  meets  the  increased  cost 
of  his  products  by  adding  to  his  selling 
price.  Augmented  costs,  due  to  short 
crops,  or  other  unseemly  circum- 
stances, fall  generally  upon  consump- 
tion. If  the  industry  involved  were 
to  bear  it  alone  and  government  pre- 
vented the  distribution  of  added  ex- 
penses, there  would  be  but  one  result 
— disaster.  So  that  if  we  expect  the 
railroads  to  draw  from  their  earnings 
to  meet  the  changed  and  developing 
conditions  of  the  day,  they  must  re- 
ceive the  same  consideration  shown  to 
other  business  enterprises,  or  the  re- 
sult with  them  will  be  the  same — 
disaster.    (Applause.) 

You  cannot  buy  land  for  terminals ; 
lay  tracks  of  steel  to  accommodate  the 
growing  traffic  of  the  nation ;  build 
spurs  to  mines,  cities  or  agricultural 
centers,  without  an  increased  cost  in 
investment.  You  can't  sell  the  securi- 
ties unless  the  public  is  assured  of  a 
return  on  the  outlay. 

TO  STRENGTHEN  INVESTORS' 
CONFIDENCE 

Every  phase  of  the  fiscal  situation 
with  the  railroads  suggests  that  some- 
thing be  done  to  establish  in  the  mind 
of  the  investing  public  some  fixed 
idea,  not  only  of  the  inherent  value 
of  the  railroads,  but  a  national  policy, 
securely  supported  by  an  intelligent 
public  opinion,  must  be  framed  for  the 
conservation  of  the  transportation 
utilities,  and  you  cannot  conserve  the 
business  without  conserving  the  confi- 


dence of  the  country.  Railroad  men 
everywhere  admit  that  a  new  day  in 
the  afifairs  of  this  industry  has  arrived, 
and  that  the  old  order  of  things  is 
displaced,  first  by  the  impossibility  of 
extensive  exploit  and  adventure,  and, 
second,  by  a  new  moral  code  which 
seems  to  be  finding  adoption  every- 
where. The  policy  of  dealing  above  g 
board  with  the  government,  public  and 
shipper,  will  become  the  real  asset  of 
the  railroads.  The  government  is  the 
best  agency  to  give  dignified  and  * 
effective  exploitation  of  that  plan.  If 
a  railroad  corporation  desires  to  work 
out  a  project  of  extension  or  improve- 
ment, and  votes  a  perfectly  honest 
issue  of  securities,  with  every  intent  to 
disburse  them  in  good  faith,  the  very 
essence  of  the  whole  transaction  in- 
spires confidence  which  will  be  wide- 
spread if  some  agency  without  the 
railroad  organization  certifies  the 
legitimacy  of  the  enterprise. 

I  introduce,  therefore,  entirely  re- 
gardless of  the  objections  that  have 
been  raised  to  the  plan,  the  suggestion 
that  ultimate  relief  will  never  come 
until  the  Interstate  Commerce  Com- 
mission passes  upon  the  issuance  of 
securities.  Now,  let  us  analyze  this 
proposal. 

FEDERAL  SUPERVISION 

Suppose  the  Pennsylvania  Railroad 
Company  desired  to  issue  $50,000,000 
in  bonds — and  I  cannot  mention  the 
Pennsylvania  Railway  Company  with- 
out making  this  observation,  that  out 
in  our  country  we  believe  that  its 
honor  has  never  been  stained — (great 
applause) — and  it  prepares  to  issue 
these  securities.  It  goes  to  Washing- 
ton, and  submits  in  detail  and  specifi- 
cation absolutely  everything  connected 
with  the  project.  The  Government 
makes  its  investigation,  finds  it  to  be 
a  legitimate  enterprise,  and  it  says  so. 
It  certifies  the  integrity  and  the 
legitimacy  of  that  project.  You  then 
divide  your  securities  into  smaller 
denominations.     Confidence  has  been 


8 


procured  by  the  Government  partici- 
pation, and  if  you  give  the  people  the 
opportunity  to  buy  the  securities,  in 
ten  years'  time  the  railroads  will  be 
owned  by  the  people  and  you  will  have 
public  ownership  instead  of  govern- 
ment ownership.    (Great  applause.) 

STATE  RIGHTS  OBJECTION 

I  am  mindful  of  the  recommenda- 
tions made  by  the  commission  ap- 
pointed to  investigate  this  plan.  It 
proceeds  from  the  premise  of  state 
rights.  Every  fair-minded  student  of 
this  great  subject  concedes  that  when 
the  states  manifest  no  disposition  to 
act  in  concert  with  reference  to  a  sub- 
ject, nation-wide  in  its  consequences, 
for  the  simple  reason  that  the  federal 
unit  of  government  can  reach  the 
responsibility  with  more  efficiency  and 
directness  than  the  states,  the  general 
welfare  of  the  people  must  be  consid- 
ered before  the  ethical  rights  of  the 
states.  Let  me  give  you  this  illustra- 
tion: 

The  Pennsylvania  Railroad  Com- 
pany operates  largely  in  the  states  of 
New  York,  Pennsylvania,  Ohio,  In- 
diana and  Illinois.  I  think  only  two 
of  these  states  have  laws  which  com- 
pel governmental  supervision  over  the 
issuance  of  securities.  The  company 
submits  its  project  to  Ohio,  which  has 
such  a  law,  and  yet,  this  procedure  by 
one  or  two  states  does  not  give  the 
slightest  aid  to  the  investor  because 
the  local  authority  is  concerned  only 
about  the  improvement  within  the 
State.  Ohio  counties  used  to  value 
utilities  for  taxation;  but  it  became 
perfectly  apparent  that  they  must  sur- 
render the  task  to  the  State  in  order 
that  the  valuation  could  be  made  on 
the  corporate  unit  or  that  part  of  it 
local  to  the  commonwealth.  The  re- 
sults have  been  so  satisfactory  that  no 
one  would  think  of  restoring  the  old 
order  of  things. 


MUST  HAVE  LIVING  RATES 

As  already  indicated,  I  hold  no 
brief  for  the  railroads,  but  I  recognize 
that  government,  from  the  standpoint 
of  morals  and  expediency,  must  per- 
mit them  to  have  living  rates.  The 
survey  should  be  an  exhaustive  one; 
and  if  it  develops  that  while  the  gross 
receipts  have  increased,  the  net  re- 
ceipts are  considerably  diminished  by 
the  liberal  policy  of  society,  then  relief 
ought  to  be  granted,  whether  it  be  i%, 
5%  or  io%  that  is  needed.  (Ap- 
plause.) 

There  is  nothing  more  harmful  than 
the  tendency  to  hold  to  a  fetich. 
There  is  no  more  offensive  species  of 
standpatism  than  to  impose  a  rate  one 
year  and  continue  it  without  term. 

The  future  may  develop  the  neces- 
sity of  scaling  rates  downward.  The 
inventive  genius  of  man  may  contri- 
bute the  means  to  vast  economies  in 
operation.  When  that  comes  the  pub- 
lic should  be  given  a  reasonable  rate, 
based  on  the  cost  of  the  service — the 
reasonableness  of  the  rate  is  the  issue 
now,  and  always  will  be.  The  rail- 
roads are  entitled  to  it,  and  so  is  the 
shipper. 

Recognizing,  as  we  do,  that  there  is 
some  prejudice  against  the  railroads 
and  that  an  increase  in  rate,  even 
though  suggested  by  every  considera- 
tion of  fairness,  might  be  unpopular, 
our  great  government  has  no  higher 
function  than  rising  to  the  dignity  of 
a  courageous  recognition  of  rights, 
whether  they  be  individual  or  cor- 
porate. 

RATES  ARE  LOW 

Statistics  would  seem  to  show  that 
while  the  government  receives  two 
cents  for  carrying  a  letter  from  one  to 
a  thousand  miles — a  very  unscientific 
rating,  by  the  way — the  railroads 
transport  a  ton  of  freight  three  miles 
for  the  price  of  a  postage  stamp.  This 
might  be  an  odious  comparison,  and 


yet,  it  reduces  the  whole  situation  to  a 
problem  so  simple  that  we  can  better 
understand  it. 

The  question  of  rates  is  an  involved 
one.  There  are  so  many  things  to  con- 
sider that  one  develops  a  sympathetic 
attitude  for  the  ]jiterstate  Commerce 
Commission.  There  can,  of  course,  be 
nothing  but  a  uniform  rate,  and  yet  it 
has  its  elements  of  unfairness.  Let  us 
analyze  this : 

Between  Chicago  and  St.  Paul  there 
are  six  different  competitive  railroads, 
and  their  capitalization  per  mile  is  as 
follows : 

Per  mile 
Chicago,  Burlington  and  Quin- 

cy   $36,338 

Minneapolis,     St.     Paul     and 

Sault  Ste.  Marie 36,362 

Chicago  &  Northwestern 43,900 

Illinois     Central — Minneapolis 

&   St.   Louis 58,000 

Chicago,  Milwaukee  &  St.  Paul  58,342 

Chicago  Great  Western 74,9^3 

BONUSES  WERE  NECESSARY 

The  first  thought  might  be  that  the 
vast  difference  is  due  to  varying  poli- 
cies of  finance,  and  construction.  The 
question  of  integrity  may  be  raised, 
and  yet  on  analysis  explanation  may 
be  found  in  considerable  part  in  the 
matter  of  terminal  values,  a  difference 
in  rolling  stock  and  roadbed — the 
physical  characteristics  of  the  routes 
might  add  to  the  cost  in  one  instance 
and  reduce  it  in  another.  Some  of 
the  roads  may  have  been  built  when 
the  future  of  railroads  was  uncertain, 
and  bonuses  were  necessary  to  the 
completion  of  the  enterprise.  We 
must  recognize  that  few  projects  in 
the  formative  period  of  any  industry 
were  ever  launched  without  common 
stock  being  given  with  the  subscrip- 
tion of  bonds  or  preferred  stock.  The 
man  who  took  a  long  chance  is  en- 
titled to  a  reward  beyond  his  six  per 
cent,  return.     (Applause.) 


EARLY  OBSTACLES 

Let  us  not  forget  the  difficulties 
railroads  encountered  and  overcame. 
In  our  own  good  State,  with  a  citizen- 
ship that  has  always  been  progressive, 
the  early  Legislature  was  asked  to 
prevent  the  construction  of  steam  rail- 
roads on  the  ground  that  the  trains 
would  frighten  the  stock  in  the  fields 
until  it  would  not  take  on  fat.  It  was 
urged  that  transportation  by  wagon 
would  be  impossible  with  trains  run- 
ning through  the  lands  because  the 
oxen  and  horses  would  be  frightened 
to  the  point  of  frenzy  by  the  whistling 
of  the  engines.     (Laughter.) 

Then,  as  a  compromise,  it  was  pro- 
posed to  allow  the  roads  to  be  built 
and  operated,  provided  the  trains 
would  stop  within  half  a  mile  of  the 
wagon  road  and  someone  would  go 
ahead  to  notify  the  people  along  the 
road  that  the  train  was  approaching. 
Nor  was  this  during  the  dark  ages.  It 
was  within  the  memory  of  the  oldest 
inhabitants  of  the  State.     (Laughter.) 

The  first  newspaper  published  in 
Ohio  was  established  a  little  over  a 
hundred  years  ago,  and  known  as  the 
Western  Star.  It  is  still  operated 
under  that  name,  although  the  western 
stars  have  moved  three  thousand  miles 
further  west.  In  an  issue  of  that 
paper  there  was  printed  an  argument 
against  railroad  construction  in  Ohio 
upon  purely  economic  grounds.  It 
was  shown  that  one  train  would  dis- 
place fifty  horses— that  it  would  draw 
as  much  freight  as  twenty-five  two 
horse  teams.  And  the  writer  sought 
to  show  that  the  displacement  of  so 
many  horses  would  tend  to  lower  the 
price  of  grain— that  the  raising  of 
grain  would  be  unprofitable  because 
Ihere  would  be  no  horses  to  eat  it. 

But  every  reform  that  has  been 
worked  out,  every  invention  that  has 
been  launched,  has  had  to  meet  this 
economic  opposition.  Christianity  it- 
self was  opposed  upon  purely  eco- 
nomic grounds  in  the  beginning.    One 


10 


of  the  philosophers  of  Rome  congratu- 
lated Nero  upon  his  attempt  to  stamp 
out  Christianity  on  the  ground  that 
there  were  so  many  people  embracing 
the  new  teaching  that  it  was  affecting 
the  market  for  fodder  used  to  fatten 
cattle  for  heathen  sacrifice.  (Laugh- 
ter.) 

In  1818  the  school  board  of  Lan- 
caster Township  passed  a  resolution 
refusing  to  allow  the  use  of  the  school 
house  for  a  debate  upon  the  subject  of 
railroads  and  telegraphs.  The  resolu- 
tion stated  that  such  propositions  as 
railroads  and  telegraphs  were  marks 
of  infidelity  and  held  that  had  the 
Lord  intended  men  to  talk  through  the 
air  or  ride  at  the  rate  of  fifteen  miles 
an  hour  it  would  have  been  foretold 
in  the  Scripture,  and  that  a  careful 
search  of  the  Scripture  failed  to  reveal 
any  such  prophecy.    (Laughter.) 

CAPITALIZATION 

Attention  is  drawn  to  the  vast  ex- 
cess of  capitalization  of  foreign  rail- 
roads per  mile  as  compared  to  Ameri- 
can lines,  and  the  difference  is  im- 
pressive, as  shown  by  the  following 
exhibit : 

Capitalization  per  mile  of  line : 

United  States $  62,657 

Germany   1 13,855 

France    144,683 

United  Kingdom  275,156 

England  and  Wales 328,415 

Two  factors  must  be  considered  in 
this.  When  steam  as  a  motive  power 
made  railroads  possible,  European 
cities  were  developed  in  size  and  realty 
values,  and  terminals  were  expensive, 
while  in  this  country  the  railroads  and 
cities  grew  together.  Furthermore, 
the  American  roads  were  given  vast 
subsidies  in  lands  and  rights  of  way — 


a  considerable  factor  in  their  present 
wealth  and  resource  which  enabled 
many  extensions  and  improvements  to 
be  made  without  the  issuance  of  se- 
curities. 

That  the  rates  are  lower  in  America 
than  abroad  is  but  another  tribute  to 
the  genius  of  our  people,  and  the  ad- 
mission is  another  puncture  in  the 
fallacious  doctrine  that  we  cannot 
produce  most  things  in  this  country  as 
cheaply   as  in  Europe.      (Laughter.) 

MATTER  FOR  PUBLIC  OPINION 

In  closing,  let  us  all  dedicate  our- 
selves to  the  solution  of  this  great 
problem  of  transportation — recogniz- 
ing that  it  concerns  every  community 
and  every  household.  Let  us  be  re- 
minded that  in  the  forum  of  public 
opinion  every  issue  has  been  settled, 
and  ultimately  settled  right  in  this  our 
glorious  country.  If  progress  means 
anything,  it  is  that  prejudice  cannot 
last,  and  that  fair  dealing  will  be 
endorsed. 

It  is  no  reflection  on  the  stability  of 
our  race  that  we  adjust  ourselves  in 
government  and  commerce,  to  the 
changing  order  of  the  day.  It  would 
be  better  never  to  have  been  lifted  at 
all  to  the  higher  moral  vision  of  ad- 
vanced civilization  if  we  are  to  retain 
the  field  glasses  of  yesterday.  Upon 
every  hill  the  Goddess  of  Progress  has 
planted  her  trumpeteers,  showing  us 
the  way  to  a  greater  national  destiny, 
reminding  us  that  life  is  but  the  march 
of  generation,  and  we  have  our  pil- 
grimage to  cover.  Let  us  do  it  with 
an  open  mindedness  that  enabled  our 
fathers  to  burst  the  restraints  of 
prejudice  and  tradition,  arid  find  fuller 
happiness,  strength  and  Godliness,  in 
the  radiant  influence  of  the  new  day. 
(Great  and  prolonged  applause.) 


11 


